Private label brands are those brands which are owned by the retailers of the products. The products are manufactured by a third-party manufacturer according to the direction of the retailers or distributor of the products. It is basically retailers or distributors, using the production capabilities of a different company and labeling them with their own brand which is also known as ‘white label’.
The option of private label manufacturing is sometimes preferred by the retailers over the option of selling goods of other brands. For example, famous departmental store Target, sells products of other brands like Frito lay and General Mills as well as products of its own brand Archer Farm. Hair saloons often sell their own branded shampoos, conditioners and hair waxes. Maid services sometimes offers its own products like detergents and pet grooming tools.
Some of the major benefits of Private Label are:
1) Control over the commodity – in private label the retailers have full control over the product which they want to sell. They provide all the necessary specifications to the manufacturer like its shape, size, packaging style, etc. and they produce and pack the goods accordingly. Since the retailers have full control over the products, they can also determine and have control over the price of the product. Control over the product is very crucial when it comes to vitamin manufacturing and supplement manufacturing to ensure good quality products.
In the past years, there has been a rise of private label supplements and private label vitamins.
2) Less expenditure – In private label one doesn’t have to worry about setting up of production plants which requires a lot of money. Instead, in private label the job of producing the commodity is outsourced to established manufactures. Lower the cost of production enables the retailers to sell the quality products at a much cheaper price. This helps the private label brands to survive in the market which is dominated by established brands.
3) Less time – Setting up of factories for production of goods takes a lot of time and patience. In this, one must go through the hassles of not only setting up the plant but also installing the necessary machines and staffing the plant. It takes several years to set the whole thing up so that it can produce the expected goods. In private label, you can get your products in a matter of few weeks or even days of ordering.
4) Less wastage – Private label allows the retailer order products in a reasonable volume to ensure there is no wastage of products. The retailer can save his warehousing costs and shipping costs by ordering less and therefore minimizing loss. Before introducing any products, the retailers can first order in a small quantity to get the reaction of the customers. According to the feedback of the customers the retailers can make certain changes in their products before placing a bigger order.
5) Exclusivity – The products are only sold by the retailers. The customers don’t have the option of going to a different store to buy the product. This results in greater turn up of customers in the store. The customers also develops a favorability towards the store because of its brand.